Financially secure, risk-aware: The future of credit
Here’s where retailers can learn more about making payments secure – benefitting both consumers and businesses.
With technology moving at such a rapid pace, it’s hard to remember a time where we couldn’t just tap, click and have something arrive at your door. With the ability to tap for sushi, a ride home or even a whole other human to date, instant gratification is the new black.
Speed, personalisation and convenience are now what customers expect. If you can’t reach your customers where they are, with what they want, and make it super easy to get it, you’re going to be left behind. Nobody is immune to this changing expectation, and banks and traditional lenders are no exception.
If you’re reading this, you’re no doubt aware of the Buy Now, Pay Later (BNPL) craze that’s sweeping the nation. Businesses have tapped into a rapidly growing segment of consumers who want to access fast, easy-to-use payment solutions that let them to pay in installments, in lieu of credit cards and other forms of traditional lending. Unfortunately, though, this new type of lending isn’t saving people from the downward spiral of debt they’d hoped to avoid.
With technology developing in leaps and bounds, providing unprecedented data and more sophisticated insights, credit needs to undergo a radical transformation: from one-size-fits-all risk-averse lending you’d get from a bank, to personalised, risk-aware, predictive payments at the point of sale.
So what does credit of the future look like?
Credit of the future is contextual, intelligent and empathetic. It trusts the customer, and understands that not everyone has a 9-5 job, steady income, 2.3 kids and a dog. It empowers and supports an intimate relationship between brand and customer. It lets people make mistakes and helps them rectify and learn from them. It’s not exploitative, predatory or vengeful. It adapts to customers’ circumstances, allows for second chances and offers people credit on their terms, not someone else’s.
The future of credit rewards good behaviour and supports better financial decisions. It assumes you can manage what you borrow, rather than dig for all the reasons you won’t.
Credit reports and applications as we know them will be a thing of the past. Credit offers will be contextual and proactive, in real time, and based on a wider, more inclusive range of factors, like age, location, life stage, shopping behaviour and amount. It will be aware of your outstanding expenditures to ensure you don’t spread yourself too thin. It will better predict and identify when a customer is at risk and help them get back on track before it’s too late. And it will learn, adapt and improve as customers build relationships with merchants and brands.
Customers deserve complete control over repayments with the ability to design their own repayment plans – upfront, deferred, instalments or whatever’s next – with repayment terms that work for them and their circumstances. And they deserve the ability to change those plans at any time, and to be rewarded for early repayment.
Merchants and credit providers need to move away from risk-aversion and instead become risk-aware. This means accepting that their customers will make bad financial decisions, or have changing circumstances, and work to educate, support and guide them through when times are tough. Using sophisticated insights and predictive analysis, credit providers can intervene when they see a customer at risk of default and give them opportunities and support to turn it around.
Soon we’ll see more open dialogue about how to use credit responsibly, and credit will become less about rigid criteria and more focused on honest conversations, proactive interventions and non-judgemental resolution to help the customer get back on track.
The credit of the future is less about risk and more about flexibility. It aligns with people’s budgets, while delivering seamless in-store and online payment experiences. It shares strong insights into customer preferences and behaviour to merchants, enabling to better identify opportunities for marketing, growth and business development. And really, isn’t that what we all want from business?
About the Author
Timothy Dwyer is the co-founder and CEO of Limepay, a payment platform helping businesses of all sizes grow by strengthening customer experiences. He’s passionate about developing smart, flexible solutions to lay the foundations of a more intuitive future for commerce. For Tim, the next three years is all about brand, people and experiences.
Co-Author: Jennifer Robson – Content Strategist of Limepay